WASHINGTON – The US Federal Reserve froze on Friday the expansion of the banking giant Wells Fargo until it improves its management, after noting “pervasive and persistent misconduct.”
“Until the firm makes sufficient improvements, it will be restricted from growing any larger than its total asset size as of the end of 2017,” the Fed said in a statement.
The Fed’s decision came two years after a scandal concerning fake accounts that Wells Fargo employees opened without the authorization or knowledge of their clients to comply with commercial targets.
Wells Fargo has admitted that this was a widespread practice in the bank between 2009 and 2016 and decided to dismiss 5,300 of its employees.
The bank has already paid $185 million in fines for that practice and another $142 million to settle a class action lawsuit.
In October 2016, the scandal led to the resignation of its then CEO, John Stumpf, who was replaced by Tim Sloan.
In its statement on Friday, the Fed said that Wells Fargo had prioritized its growth without ensuring effective risk management.
“The enforcement action we are taking today will ensure that Wells Fargo will not expand until it is able to do so safely and with the protections needed to manage all of its risks and protect its customers,” Fed Chair Janet Yellen said.
Wells Fargo will replace three members of its board of directors by April and another one by the end of 2018, the Fed statement said.